Earlier this month, the Department of Justice announced in a press release that William Gosha III, who went by the nickname Boo Boo, was sentenced to 30 years for his role as mastermind in a brazen identity theft ring that resulted in the filing over 8,800 fake tax returns and the receipt of over $9 million in bogus refunds.

The case stands out both for its scope and impact. Co-conspirators included an employee of a hospital in Fort Benning, Georgia, who stole US soldiers’ identities and Social Security numbers. The soldiers’ information enabled Boo Boo and co-conspirators to file fake returns claiming phony refunds, including for soldiers who were stationed in Afghanistan.

The scheme also reached other government agencies, as co-conspirators included an employee of the Georgia Department of Public Health and Georgia Department of Human Services. Gosha also arranged to steal identities from inmates at a local prison and conspired with a US Postal Service employee to get physical addresses for refunds when financial institutions limited his ability to get refunds directly deposited in bank accounts.

Thirty years seems on the high end for sentencing for a crime such as this though I doubt that many schemes have had this deep a reach with other government agencies. In addition, the victim impact statements, including a statement from a parent of a soldier whose identity was stolen and who heard from the IRS while her son was in Afghanistan, must have had a major influence on the sentence:

This news was devastating to think that my [] 19-year-old son[,] who was defending the very freedom this country stands [for] [,] was wronged by one of those people [he] was willing to die for. My whole family could not believe what was happening. We now had to worry about this terrible act by one of our own. As I tried my best to keep composed and handle all of the gruesome mounds of paperwork to get this straightened out with the IRS, [my son] was then denied his tax refund [as result of this scheme]. This created a financial hardship on [him]. We were too afraid to tell [him] while he was deployed because we did not want to worry him and we wanted him to focus only on getting home alive and not have to worry about such an atrocious act by someone who did not even know

Last month IRS announced that in 2017 it has been very successful in cutting back on identity theft based refund fraud. Key indicators show that IRS has turned the tide in the battle:

In 2017, the IRS received 242,000 reports from taxpayers compared to 401,000 in 2016 – a 40 percent decline. This was the second year in a row this number fell, dropping from the 677,000 victim reports in 2015. Overall, the number of identity theft victims has fallen nearly 65 percent between 2015 and 2017.

The number of tax returns with confirmed identity theft declined to 597,000 in 2017, compared to 883,000 in 2016 – a 32 percent decline. The amount of refunds protected from those fraudulent returns was $6 billion in 2017, compared to $6.4 billion in 2016. In 2015, there were 1.4 million confirmed identity theft returns totaling $8.7 billion in refunds protected. Overall during the 2015-2017 period, the number of confirmed identity theft tax returns fell by 57 percent with more than $20 billion in taxpayer refunds being protected.

As this DOJ Press release shows, identity theft is not a victimless crime. While IRS and its private sector partners are making major headway the problem is still plaguing hundreds of thousands of people, causing direct costs on them and on all of us in the form of significant IRS resources dedicated to this fight.

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Comments

The mouse and cat games with criminals will never end, but certainly it is good news to learn that IRS is making progress in stopping ID theft and fraud cases. Tax professionals have a good share of responsibility in the problem. Many tax pros still use information exchange practices with clients that are considered unsafe from the cybersecurity standpoint. It could be a good idea for all tax pros out there to start reading about information security, so they can implement changes in a reasonable short future.

When victims sue in court and IRS employees participated in the identity theft, the DOJ still asserts that identity theft is a victimless crime and the victim isn’t really a victim. If justice were involved then we’d know that victims are victims, but when Justice is involved there’s no justice.

“Seems like more enforcement of rules against splitting refunds to multiple account owners, and perhaps requiring some time frame around an account (e.g., the account must have been existence for at least four months prior to the claim) might have an impact.”

What would have a real impact is issuing a paper check, with the taxpayer’s name on it, to an actual address, instead of allowing direct deposit of refunds.

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Leslie Book

Keith Fogg

T. Keith Fogg is a Clinical Professor of Law at Harvard Law School where he started a tax clinic in 2015. Prior to joining the faculty at Harvard, he began his academic career at Villanova Law School in 2007 after working for over 30 years with the Office of Chief Counsel, IRS. Read More…

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